Private sector lender ICICI Bank has cut fixed deposit rates by up to 50 basis points effective from May 11. As per the new rates, the deposits up to one year will yield 5.25 per cent while those above one year will earn 5.7-5.75 percent, according to the interest rate card on the bank's website.
Earlier, the bank used to offer 25-50 bps more on these maturities. With no demand for credit in a locked-down economy, banks are flush with liquidity and do not want further inflow of deposits. In other words, banks want to disincentivise the inflow of deposits by making the returns less attractive.
The rate cut from ICICI Bank comes amid reports that banks are flush with deposits and reduced scope for additional lending in a locked-down economy. Last week, State Bank of India, the country's biggest lender, announced 20 basis points reduction in FD rates.
Till last month, SBI used to offer 3.25 per cent on these accounts, which was cut to 3 per cent on March 11. The bank stated that it has adequate liquidity and hence it doesn’t need to incentivise further deposit inflows.